2 Summary of recent events
12. This report is concerned with more than just
the events which gave rise to the police investigation into the
possible sale of peerages. Nonetheless, our inquiry has clearly
been shaped by those events. We set out here a brief summary of
the generally agreed narrative. This summary then informs the
discussion of options for reform which makes up the remainder
of this report.
13. The first reports that certain nominees to the
House of Lords had been blocked (or, more accurately, queried)
by the House of Lords Appointments Commission emerged in newspapers
in November 2005.[14]
In March 2006, the identities of those nominees became public,
as did the fact that the four nominees in question had all made
undeclared loans to the Labour Party in 2005. The nominees in
question were Barry Townsley, a stockbroker who also donated money
towards a city academy school; Sir David Garrard, a property developer
who also donated money to a city academy; Dr Chai Patel, chief
executive of Priory Clinics; and Sir Gulam Noon of Noon Foods.
The CPS later confirmed that the police investigation "subsequently
revealed that the names of other individuals who had loaned money
to the Labour Party appeared on earlier drafts of the working
peers list."[15]
14. The police investigation, by a team from the
Metropolitan Police led by Assistant Commissioner John Yates,
commenced in March 2006, following a complaint made by an Hon.
Member belonging to the Scottish National Party that an attempt
had been made to confer peerages in contravention of section 1
of the Honours (Prevention of Abuses) Act 1925 ("the 1925
Act"). The complaint alleged that a number of individuals
had agreed to make substantial loans to the Labour Party on the
understanding that they would be rewarded by the grant of a peerage.
Mr Yates has also confirmed to us that he had more than 20 complaints
made to him based on these same allegations.[16]
The investigation was subsequently widened to consider charges
under the Political Parties, Elections and Referendums Act 2000
("the 2000 Act"), and further "whether certain
events might be interpreted as acts tending and intended to pervert
the course of justice".[17]
The investigation also looked into actions taken by the Conservative
Party.
15. All of the events under investigation by the
police can be traced back to the parties' need for funding during
the May 2005 general election campaign (although the general issue
had been around for much longer). Some press coverage at the time
reported that the two largest parties were heavily dependent on
undeclared loan funding to get themselves through an expensive
campaign.[18] Under the
2000 Act there was no legal requirement for parties to declare
loans taken out on commercial terms. We now know from the retrospective
reporting required under the Electoral Administration Act 2006
that the Labour Party borrowed £11,950,000 in undeclared
loans from wealthy individuals between April and October 2005.[19]
Other parties had also taken out undeclared loans from individuals
and banks.
16. The police investigation was originally envisaged
to be of short duration but eventually ran for sixteen months
before the final file was handed over to the CPS on 2 July 2007.
As at 13 November 2006 we know that the police had already conducted
90 interviews, including 35 within the Labour Party, 29 within
the Conservative Party and four within the Liberal Democrat Party.
Those numbers included prominent figures such as the former Leader
of the Opposition, Rt Hon Michael Howard MP, Cabinet ministers
and the then Prime Minister. We understand that this was the first
time a sitting Prime Minister had been interviewed as part of
a criminal investigation. Assistant Commissioner Yates told us
that the cost of the investigation was "around £1 million"
with three quarters of that being staff costs.[20]
There will also have been costs to the public purse in terms of
staff time in government and in the CPS.
17. Four arrests were made in the course of the investigation:
- Des Smith, the head teacher
at All Saints Catholic School and Technology College, Dagenham.
Mr Smith was a council member of the Specialist Schools and Academies
Trust, which helped the Government recruit sponsors for the City
Academy programme. He was alleged to have suggested that honours
or peerages might be offered as rewards for sponsoring Academies.[21]
- Lord Levy, the Prime Minister's Special Envoy
to the Middle East and also a key fundraiser for the Labour Party.
Lord Levy was arrested in July 2006 and subsequently again in
January 2007.[22]
- Ruth Turner, the Prime Minister's Director of
Government Relations. Ms Turner was a Special Adviser reporting
directly to Jonathan Powell as Chief of Staff in the Prime Minister's
Office.
- Sir Christopher Evans of Merlin Biosciences.
Sir Christopher was a biotechnology entrepreneur who loaned £1
million to the Labour Party in 2005.
The decision not to bring any charges against Mr
Smith was announced on 7 February 2007.[23]
The investigation of Mr Smith turned out to be substantially unrelated
to the other matters under investigation, and we have not attempted
to draw lessons from the aspect of the police inquiry.
18. As already stated, the CPS confirmed on 20 July
2007 that no criminal proceedings would be taken forward against
anyone connected with the inquiry. This was followed by an announcement
in October that no charges were to be brought against anyone linked
to the Conservative Party. No investigations are being pursued
with regard to any other party.
14 See for example "Inquiry launched as peers
fiasco grows", The Independent on Sunday, 6 November
2005, p 4 Back
15
Crown Prosecution Service, CPS decision: "Cash For Honours"
case - explanatory document, 20 July 2007, para 9 Back
16
Q 265 Back
17
Crown Prosecution Service, CPS decision: "Cash For Honours"
case- explanatory document, 20 July 2007, para 5 Back
18
See for example "Secret loans bolster Pounds 16m Tory election
campaign", The Times, 21 April 2005, p 1, or "Election
watchdog to investigate party loans", The Guardian,
21 April 2005 Back
19
Statistics from www.electoralcommission.org.uk/regulatory-issues/-includes
loans from Barry Townsley, Gordon Crawford, Lord Sainsbury, Sir
David Garrard, Sir Gulam Noon, Andrew Rosenfeld, Professor Sir
Christopher Evans, Dr Chai Patel CBE, Derek Tullett CBE, Nigel
Morris and Rod Aldridge. A further £2 million loan from Richard
Caring was reported in the Guardian on 21 March 2006, but the
Electoral Commission's register does not record this as having
been taken out until June 2006. Back
20
Q 338 Back
21
"Revealed: cash for honours scandal; Insight", Sunday
Times, 15 January 2006, p1 Back
22
Reported in various newspapers, e.g. Andrew Grice and Colin Brown,
"Levy arrested again-and this time on suspicion of perverting
course of justice", The Independent, 31 January 2007,
p2 Back
23
Crown Prosecution Service, CPS Statement: Mr Des Smith,
6 February 2007 Back
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